Mumbai: Plethico Pharmaceuticals is looking at trimming its Contract Research and Manufacturing Services (CRAMS) business as low margins are being further squeezed due to higher inflation and surging crude oil prices.
“We will trim our CRAMS business because the margins are getting squeezed out. Many of our CRAMS deals are coming up for renegotiation and if we don’t get what we want, we have to trim that vertical,” Plethico CFO Sanjay Pai told PTI.
Pai blamed inflation and surging crude oil prices for the margins to fall in CRAMS business. Inflation was at 11.42% for week ended 14 June, while oil touched a high of $142 a barrel last week.
CRAMS is a process of manufacturing medicines for other pharma players.
Piramal Healthcare, formerly Nicholas Piramal, earns 50% of its revenue through the CRAMS model. Last year, Wockhardt also entered this model.
“The margin in CRAMS business is 6% and it is expected to come down to 3-4%,” he said.
“However, we won’t be exiting this vertical. There are some orders which are still profitable and we will continue with those orders,” he added.
Plethico’s revenues from CRAMS vertical is more than Rs100 crore per annum. Many of its clients in this vertical are Indian pharmaceutical companies.
Simultaneously, the pharma company plans to set up a plant in Dubai for medicated lozenges at an investment of Rs100 crore. “It will be a fully automated plant and work on it begins soon,” Pai said.
Explaining the rationale behind setting up a unit in Dubai, he said having a facility in Dubai helps the company to cover the Gulf region, the US and the UK easily than being in India.